Archive for May 2013

Your Click Will Help Us Give Away 2,500 Books!

I’ve entered I Was Broke. Now I’m Not. into a contest being sponsored by TransAmerica. It is a contest where business owners share their “It’s Real Now” Moment – the defining moment where they realized their business had moved from dream to full reality.

The winner of the award will receive $4,500 to help build a better tomorrow. When I saw the details of the contest, I knew we had to enter it because we would use this prize money to help us buy and distribute 2,500 books for people who are struggling financially.

Here’s how you can help – VOTE for us on the TransAmerica Facebook Contest Page. Here’s the steps:

  1. Click THIS LINK or copy and paste this address: http://bit.ly/13nSCyu
  2. “LIKE” the TransAmerica page
  3. My video and story will appear along with a red “VOTE” button (see image below)
  4. CLICK the red “VOTE” button
  5. HUGE NEWS: You can VOTE once every 24 hours! PLEASE PLEASE PLEASE vote once a day between now and the end of the contest on Friday, June 7th!

NOTE: You will be offered the opportunity to share the fact that you voted with your friends list. It would be great if you did share it, but you could hit “cancel” on the following screen and it will record your vote without sharing it on your FB page.

Thank you for VOTING FOR US and for helping us give away 2,500 books!

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When Credit Scores Are Dumb

I recently went through a process that required my credit score to be checked. When I received it, I had to laugh out loud.

My credit score was extremely high, but there were reasons it wasn’t “perfect.” These reasons were listed on the document, and they furthered my belief that credit scores are a pretty dumb way to measure “financial healthiness.”

Here are some of the reasons my credit score wasn’t absolutely a perfect score:

  1. Lack of recent installment loans (I paid my house off in January!)
  2. Lack of long-term credit relationships(I paid off all my non-house debt in February 2004)
  3. Lack of credit accounts (Duh!)

Think about this for one minute. Most insurance companies establish premium rates based in large part on credit scores. Many employers check credit scores of potential employees.

Here’s what you must know: Your Credit Score would be more aptly named if it were called a “Debt Management Score.”

Your credit score has NOTHING to do with:

  1. The amount of money you have in a bank account
  2. The amount of money you have invested – for college, retirement, or dreams
  3. Other assets you own
  4. Your overall net worth

When people modify their behavior to keep paying debt payments “just to keep their credit scores high” – THAT is financially dumb behavior.

Your thoughts?

This One Trick Can Change Your Financial Status

Do you feel “stuck” financially? If so, this one trick can change your financial status.

Think in terms of NET WORTH instead of INCOME.

It can become easy to focus only on current circumstances. If asked, “How are you doing financially?” by a close friend or family member, an “income” thinker might respond with these type of answers:

  • Raises “I got a raise!” or “I haven’t gotten a raise in three years.”
  • Income “I’m making more money than I ever have.” or “I’m making half of what I used to make.”
  • Outgo  “Costs keep going up up up!” or “My kids are eating me out of house and home.”

BUT if you move to another level of financial awareness, your answers would be much more focused on building net worth instead of income. Responses of a “net worth” focused individual would be similar to:

  • Assets  “I purchased another rental home. It was cash flow positive from day one, will be paid off within five years, and will then provide free cash flow, after expenses, of around $600/month for the rest of my life.”
  • Liabilities  “I paid off my home mortgage. This has freed up substantial income I am going to use to purchase more assets.”

The INCOME approach can take a negative “victim” turn where financial challenges are the result of something or someone else. The NET WORTH approach allows you to take control of your financial future.

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Money Switching Pockets

In life, we all can get so busy that it becomes difficult to look beyond our daily activities. The demands of our schedule seem endless: work, children, hobbies, exercise, church, board meetings, and family make it feel virtually impossible to carve out time to think about the future.

But the past has proven one key fact to be true: The future is coming.

By making great financial decisions along the way, your financial future will be incredible.

One key financial principle we must always remember is what I call the “money switching pockets” investment.

Suppose a person purchases a house and does so by obtaining a $150,000 mortgage – 4% interest, 180 months (15 year), monthly payment of $1,109.53.

It can be easy to think, “I have a bill of $1,109.53 every month.” and just think that money has disappeared just like the power bill money. BUT it didn’t all leave you – some of it just switched pockets!

You see, some of that money did disappear – that was the interest portion of your investment, but the principal payment money switched pockets. It is still your money, it is just in a different pocket called “home equity.” When you sell the house, you will be able to transfer that money into another pocket (like your bank account)! In this example, in just the first month of the repayment period, $609.53 of the $1,109.53 payment just switched pockets! That means your effective monthly housing cost was $500!

Just by paying regular monthly payments for the first five years, you will increase your “switching pockets” money to $744.24 per month and reduce your monthly housing cost to $365.30!

This is why it is so important to own assets that increase in value. Not fully convinced yet about this “money switching pockets” principle? Consider a National Association of Realtors statistic that the average homeowner’s net worth is 41 times greater than a renter’s net worth!

Understanding this makes that monthly mortgage payment a lot more tolerable, doesn’t it?

PS: It gets even better when the house is paid off and you have no payment at all!

Have you checked out our FREE TOOLS lately? There are nearly 100 of them – and FREE!

1% Hugely Affects 99%

I’m a runner. I absolutely love it. If you follow me on Facebook or on Twitter, you’ve surely seen status updates related to the topic.

Over the past year or so, I’ve been using an app called RunKeeper. This App tracks each of my runs via GPS and records other cool information such as: average pace, pace per mile, total calories burned, total miles run, etc.

After a recent 4.00 mile run (in 31 minutes 32 seconds for an average pace of 7:53/mile and burning 505 calories – thanks RunKeeper!), I noticed that this app also tracks another great statistic: “Total Time Spent Exercising – This Month”

In April, it says that I spent 3 hrs 18 mins 59 secs exercising. To say it another way – of the 720 hours in April, I spent 0.461% of that time exercising.

Less than 1%.

And I am extremely fit as a result.

Here’s the lesson: What I do with 1% of my time GREATLY AFFECTS the other 99% of my time!

The same is true for your finances. If you spend less than 1% of your time each month preparing a budget and planning your giving, saving, investing, and insurance, it will GREATLY AFFECT how you will be able to live the other 99% of your life.

How about the following proposal for an approach at life?

  1. Spend 1% of your time exercising
  2. Spend 1% of your time planning your financial decisions
  3. Spend the rest of your time on awesome things like living a physically, relationally, spiritually, and financially healthy life!

Get fired up!

Joe